I hope everyone has had a productive beginning of the summer. Commencement and the accompanying exhibition ended the year on a high note and we are excited about the new Architecture and DHA faculty who will be joining us this fall, but we also face new challenges ahead, as you will read below.
The commencement ceremony and reception, along with the senior show and thesis and capstone exhibit, all went very well and they showed the dedication of our faculty and staff as well as the inventiveness of our students to great effect. Several parents, alumni, and guests remarked not just about the quality of the work of our students, but also about the strong social and environmental commitments of much of the work on display. With faculty and students on M-term trips to places like Malawi and Istanbul, and with outreach activities underway or being contemplated in places like the Philippines and Indonesia, the Minnesota mindset has taken on a distinctly international flavor.
That internationalism will also be evident among the new faculty coming here next year. In apparel design, we will be joined by Lucy Dunne, currently in Ireland; in architecture, by Benjamin Ibara, originally from Mexico, and Blaine Brownell, with his internationally known materials website (www.transstudio.com); and in retail merchandising, by Hye-Young Kim, originally from Korea, and Juanjuan Wu, originally from China. We are also in the final negotiation stages for the world heritage studies position and the director of the metropolitan design center. The energy and diversity of these new colleagues will further enhance the global reach of the college and position us well in attracting the best students from around the world.
Amidst this growth and diversification of our faculty ranks, however, we face a challenging year ahead financially, given the prospect of an economic recession in the U.S. and on-going retrenchments in state support. As you probably know by now, the college was set up with a structural deficit of over $700,000. We had hoped, over the last two years, that we could recover from this deficit through tuition increases, but the University has us using those new funds to pay for compensation and significant cost pool increases, which has kept us from being able to dig ourselves out of our fiscal hole.
The compensation increases are a good thing, and I am pleased that we will be able to grow the compensation of our faculty and staff by an average of 3.25%, which you will see in your paychecks with the beginning of the new fiscal year. The cost pools increases are used to fund central administration as well as our own space and utilities costs and the deans will be working with the University to find ways to get those costs under control, since they continue to eat into our tuition revenue and prevent us from growing our core activities of teaching, research, and outreach, and from exploring new opportunities and initiatives that have great long-term potential.
Next Year's Budget
The central allocation to the college for the coming fiscal year, along with the compensation and cost pool expenses that we will have to cover, has resulted in an expected shortfall in O&M funding of over a million dollars. O&M dollars represent a compilation of estimated undergraduate and graduate tuition, the estimated University fee, and an allocation from the provost's office from state dollars. Our requests to Morrill Hall for additional funding have gone largely unmet, as central administration has focused its efforts on covering its own shortfall created by reduced dollars from the legislature coupled with a mandate from the Regents that we restrict undergraduate tuition increases to no more than 7.5%. In addition, the University wants to build central reserves with the prospect of an expected sizable state budget deficit in the next biennium.
We have had to make some difficult decisions in light of the impending million-dollar deficit in the college, including moving the research and outreach centers to mostly external (or soft) funding, where they must depend upon research dollars, endowments, indirect cost recovery, or other outside sources of revenues. In the case of the Design Institute, we have not been able to raise new external funds for it and Jan Abrams has decided to pursue new opportunities beginning at the end of this month.
We have also been asked to "right size" the administrative staff to more accurately reflect our allocation from central administration. These are not easy decisions, and yet, as a colleague in central administration recently acknowledged, our situation -- like that of the other two Wave I colleges -- was at least partly intentional. Central apparently saw themselves over-staffing the new colleges in the belief that we would need the extra help in our first couple of years, and that once past that initial setup, we would reduce the number of staff to a more financially viable level.
Going forward, we intend to address this issue through attrition, but we needed to take some immediate steps with a few current positions. We have eliminated the facilities coordinator position in the college, and reduced summer staff support in Academic Resources. We also eliminated two staff positions within the Design Institute. We will not be filling some of the current vacancies in IT, finance, and student services and will be analyzing all future vacancies to determine if we can possibly do without the position, or fill on a part-time basis.
For the second year in a row, we have dealt with the structural deficit through administrative cuts at the college level. We asked the academic units, this year, to help by covering salary increases out of their departmental budgets, but we will all need to monitor costs very closely and be as careful and as frugal as possible in our expenditures this year.
Redesigning our Work
At the same time, we will all need to be thoughtful in deciding what we need to stop doing or do less of or less often with our slightly smaller staff. I have seen the terrible stress in organizations that think they can reduce staff and maintain or even increase workloads at the same time, and I don't want that to happen here, to our staff. As a result, I will be working with the deans, department heads, and directors this summer to find ways of engaging all of you in a discussion of what we might do more efficiently or rethink in some way. You all know the work you do better than anyone else, and we welcome your ideas and your creativity as we find a more sustainable workload that aligns with our new staffing levels.
Let me end by also saying that I hope the fiscal reality we face doesn't discourage you. We will not only get through this in the most humane way possible, but I think we will find that it will help us refocus on what is really core to what we are about as a college and on what is truly essential in our academic and operational units. The next few years give us a great opportunity to re-imagine ourselves as an institution and concentrate on those areas in which we can truly make a mark in higher education and make a difference in people's lives. It will also be a chance for our college to apply our innovation skills to ourselves in redesigning what we do and how we do it. I look forward to engaging in the process with you, knowing that -- perhaps paradoxically -- we will come out of this effort stronger and more resilient as a result.